Doug Black: Right. We’re still hearing from our contractors, it’s really gone to where they just had too much work to do to where they have a reasonable amount of work. And most of our contractors are telling us that they can see a good amount of work through the first half of the year. Repair and remodel doesn’t have a long lead time so they don’t have tremendous backlogs there traditionally. Now they did during the COVID years but — so we’ll see when we get into the second half. But they’re saying things are good for the first half. And then we would remain somewhat optimistic that that market would hold up in the second half. If you remember the professional side of repair and remodel was highly constrained by labor all through COVID.
And so we didn’t see the big run-up that — as you saw on the retail side. And so we have less — there was less pull forward if you will. So what we’re hearing from our contractors is they see a good amount of work for the first half of the year. We’ll see –the visibility is less clear for the second half but we’ll see how that develops.
Ryan Merkel: Makes sense. Pass it on. Thanks.
Doug Black: Thank you.
Operator: Our next question comes from Mike Dahl with RBC Capital Markets. Please proceed with your question.
Mike Dahl: Hi. Thanks for taking my questions and the color so far. Just a follow-up on some of the end market commentary. When you talk about new res down 20, the stable commercial Ryan just asked about R&R. Just to clarify are those volume assumptions or are those all-in assumptions? And I appreciate that you gave kind of low single-digit price inflation. But those are all-in numbers. Can you help us understand if there’s any differences in kind of the volume assumptions by end market?
Doug Black: Yes. When we think about those markets we kind of think about them as all in. I mean, it’s really hard to dissect volume. So when we’re making those comments that would be kind of an all-in.
John Guthrie: Yes. I don’t think — it’s primarily like obviously resi is going to be driven by volume. But I don’t think there’s — I think the trend we would expect would be similar across that price would not vary that significantly by end market. So while we’re talking all in in those numbers specifically volume is what’s really driving the differences, yes.
Mike Dahl: Yes. Okay. That makes sense. And then just on the price trajectory it’s helpful color in terms of the December commentary. Could you comment at all about January? And then when you talk about price low single digits in 2023, with the majority in the first half. Do you actually anticipate that as you get into the second half, we see a net headwind on price, or are you envisioning just a flatter environment on price, as you go through the year?
John Guthrie: We’re envisioning a flatter number on price throughout the year. So, relatively our — built into our assumptions is relatively flat price in Q4. And really, what we’re going to see is kind of the tail off of the — I mean, there’s some price increases going in right now. As I mentioned, there’s some commodities actually came down. So those prices that are going in right now, would carry throughout the year and then be offset by the commodities coming down. But we will have a runoff, of kind of the price — a lot of the larger price increases that happened last year throughout the year.
Doug Black: And it’s a pretty steady decline, in the first quarter to the second, to the third, to the fourth and consider the fourth flat €“ John, correct me if I’m wrong, but it’s a pretty steady decline in inflation through those quarters.
Mike Dahl: Got it. Okay. Thanks a lot. Thanks, John.
Operator: Our next question comes from Matthew Bouley with Barclays. Please proceed with your question.
Matthew Bouley: Hi, good morning. Thanks for taking the questions. I wanted to go back to the SG&A question one more time. It was helpful color you gave there in an earlier response. Just thinking about sort of the specifics around labor and some of the growth investments you’ve been making, obviously, you guys are guiding to the sort of modest deleveraging in 2023. Just curious, if you can kind of pick apart some of the details there on the SG&A side, because it does seem like pretty important component there to achieving your EBITDA guide for the year. Thank you.
John Guthrie: Yes. Well, we went into this year, I guess just broadly, we made a lot of great investments last year and kind of one of the things we’re trying to do this year, is harvest those investments. So it’s more of — we made investments, we want and drive kind of the results from those investments we made last year, with regard to — having said that, we still do face challenges like everybody else in the marketplace, that wage inflation isn’t going away right now And so, we’re going to pay our people from that standpoint. And so we’ll be managing those costs with regards to it throughout the year. As Doug mentioned, it’s very dynamic and can be done locally. But I would say, probably less new investment this year, more a harvest of last year’s investments and then moderating as we go throughout the year SG&A to demand.
Doug Black: And when John talks about harvesting, we think of all the work we’ve done on siteone.com MobilePro, DispatchTrack, our CRM that we put on the sales force, those all have the potential to drive better productivity in our branch associates and our sales associates, et cetera. And so we’re really — that’s what we’re extremely focused on, is getting those productivity improvements because this is the year that that’s going to be very important. So, that’s just a little more color on top of what John said.
Matthew Bouley: Got you. And are you able to disclose, a dollar figure or any type of quantification around those investments that sort of were there that may be ramping down this year?
Doug Black: Not beyond the general guidance that we’ll have some modest deleveraging, with the sales flat to slightly down, or flat to down mid-single digits. And you can do the math there. With wage inflation, that’s going to take some productivity improvement. Our investment dollar amount is not that material quite frankly, in terms of, savings for 2023. What’s much more important is that we get the productivity and harvest the benefit of those investments.
Matthew Bouley: Got you. Okay. Thank you. And then just the second one is back on the pricing side, that was also certainly very helpful color you gave in the prior question. But just any color around the commodity piece of the business, and what you’re seeing around fertilizer inputs and PVC and things like that, sort of what’s assumed on the commodity side, specifically within your low single-digit price inflation guide? Thank you.
John Guthrie: Those — each commodity is different, obviously, we have a negative — we’ve already seen negative growth specifically on fertilizers going into the spring, where we buy there and — from the peaks, I should say. And then similarly, we’ve already seen price decreases on PVC pipe. I mean, it’s difficult to express everyone because the commodities are different. But for instance, I think we saw going into the fourth quarter. I haven’t got an updated number, but it was like 10% to 15% decreases on PVC pipe, but that is a relatively small component of a large basket of products. So…
Matthew Bouley: Got it. All right. Thanks, John. Thanks, Doug. Good luck guys.
John Guthrie: Thank you.
Operator: Our next question comes from Keith Hughes with Truist Securities. Please proceed with your question.
Keith Hughes: Thank you. Question is on the share repurchase program. I’m sure there’s an opportunistic aspect of this given the stock price and where we are at this point. But is this going to be a longer-term change where share repurchase is going to be part of capital allocation in addition to the acquisition activity? I’m sure you’re going to continue longer term.
John Guthrie: Yes. It’s a long-term process. It’s not a quarter-by-quarter process as we think about it, as we describe our capital allocation waterfall. Our number one priority is to invest in acquisitions and grow the business and invest there. So that is number one. And if we use all of our capital to do that, we’ll be very happy if we can deploy it that way. But in so much as we maintain our conservative balance sheet, and acquisitions are very choppy, and we find that we have excess capital, we would expect to deploy some of that to share repurchases as a way to return back to our shareholders. So, I guess the only other thing just to kind of clarify that and maybe give some reality is the fact that here we are beginning of the year, we’ve got a full pipeline of acquisitions going forward.
We’re very optimistic about that. We’re starting a new year from that standpoint. So kind of from our frame of mind, we don’t feel obligated to go out and purchase capital, because we’re primarily focused on investing it right — purchasing shares, investing it right at this moment. But each year, as we go throughout the year, we’ll evaluate that and looking at our opportunities.
Keith Hughes: Okay. Given the — just building on that question, given the amount of spend of acquisitions in ’22, it seems as though with — even in a down year coming through in ’23, you would have the capital particularly the debt ratio is to do both. I guess my question is, is there a capital allocation plan in ’23 to get the debt — the debt to leverage more to the least the midpoint of your range, utilizing both acquisitions as well as share repurchase?
Doug Black: We — certainly, we can do share repurchases. And as John mentioned, as we get toward the mid to the second half of this year and see how things are going and there’s a little more certainty on how things are going to workout, that would be a lever that we can pull. One of the things we want to keep in mind, though, is we’re heading into a down cycle potentially. Whether it’s a pause or a longer cycle, we don’t know. And we want the strategic flexibility to do even any larger deals that might come down the pike. We don’t typically do large deals, but there are a few that are out there that could be in the $250 million, $300 million even $400 million range in particular companies were for sale. So, we want to make sure that we don’t get the leverage to such a point, especially going into a tougher waters that we wouldn’t be able to do those deals strategically.
So that’s part of our thought process in evaluating the strength of our balance sheet and where we should be from a target standpoint. We still think the one to two is a good target. But at this point, with the uncertainty ahead, it’s — we feel it’s prudent to be maybe a little below that range at this point.
Keith Hughes: Okay. Thank you.
